From MoneyWeek · · 1m 10s
John Healey's Budget Fixes
Chancellor John Healey reverses savings account rules after flawed tax plans.
In brief
Chancellor John Healey reverses savings account rules after flawed tax plans. John Healey reversed cash savings account limits to address loopholes in previous tax policies. Originally reported by MoneyWeek.
First Budget U-turn
John Healey reversed cash savings account limits from £12,000 to £20,000.
“One of the most telling items in John Healey's first Budget as chancellor was the U-turn on the proposal in the last Budget to reduce the limit on cash individual savings accounts (ISAs) from £20,000 to £12,000”
Money-market fund loophole
Hargreaves Lansdown launched a low-cost money-market fund with 3.95% yield.
“A few days earlier, Hargreaves Lansdown had announced the launch of a low-cost money-market fund with daily access and an expected yield of 3.95%”
Tax loophole consequences
Rachel Reeves' tax changes created a loophole for money-market funds to bypass savings limits.
“When Rachel Reeves, the previous chancellor, reduced the limit on cash ISAs, neither she, nor her team nor the Treasury had realised that money-market funds offered a giant loophole in her proposals”
Pensioner tax confusion
Pensioners with no other income face tax on pension excess over tax-free allowance.
“The prime minister had announced that pensioners with no other income would be taxed on the excess of the state pension over the tax-free allowance without thinking of the complexities this would cause”
Tax revenue shortfall
Corporation tax surcharge increase for banks raised less than £1.5 billion.
“The temporary (15 months) increase in the corporation-tax surcharge for banks from 3% to 6% won't raise an extra £1.5 billion as promised”
Savings tax impact
Savings tax increase by 2% will encourage investors to seek dividend yields.
“The increase in the tax rate on savings and property (but not on dividends) by a further 2% is expected to raise more than £500 million in a full year”
Revenue assumptions
Healey must rely on unexpected growth and next year's spending review for revenue.
“John Healey has to live with the wildly optimistic revenue assumptions of Reeves's Budgets, the money that was allegedly being raised having already been spent”
Gilts market reaction
Gilts market ignored Budget changes to avoid market volatility.
“At least the gilts market took the Budget calmly, ignoring the mass of tinkering intended to camouflage the lack of any major initiatives”
Early election strategy
Calling an early election could allow radical tax changes but risks low support.
“The way out, so the story goes, is to call an early general election while Burnham's honeymoon with the electorate lasts”
The bottom line
John Healey reversed cash savings account limits to address loopholes in previous tax policies.
